DATELINE: January 27, 2009, Chicago
Politician got on his jogging shoes
He must be running for office, got no time to lose
He been suckin' the blood out of the genius of generosity
Bob Dylan, Summer Days from Love and Theft.
Governor Blagojevich has been on a media barnstorm the last several days. Meanwhile back at the farm, the Illinois Senate continues with the trial that will inevitably result in Blago’s removal from office. Lost in the excitement is what appears to be political cronyism at both the State of Illinois and City of Chicago levels. This time the cronyism is affecting a 100-year old charity that aids the homeless. Given this year’s brutal winter, the homeless sure do need the help of the Chicago Christian Industrial League.
NBCChicago reported last week that Patti Blagojevich was feeding
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at the League’s trough. She was hired last September as a fundraiser for the League, receiving at least $100,000 a year. Patti Blagojevich Out of a Job (Jan. 21, 2009). According to the investigation conducted jointly by the Chicago Sun-Times and NBCChicago, Mrs. Blago brought in $10,000 to $15,000 a month, which is the same amount that the League received before she started. At that rate, Mrs. Blago’s compensation doesn’t look that much different than the amounts that the much criticized telemarketers receive for their charitable solicitation efforts. In fact, it may be worse if the donations would have come in regardless of her presence.
It therefore came as welcome news that the League dismissed Mrs. Blago last week. We can only speculate, but the League may have decided that given Blago’s predicament, he is unlikely to help his spouse’s fundraising efforts with state patronage. Interestingly, Chico & Nunes, a Chicago law firm, registered with the Illinois Secretary of State as lobbyist for the League on December 4, 2008. According to the Sun-Times, the lobbying relationship ended the next morning, the day that the Chicago Tribune reported that the feds were secretly taping Blago. Tim Novak, Chico Firm's Lobbying Deal Lasted Less Than a Day (Jan. 26, 2009). Gary Chico is the president of the Chicago Park District. According to the Sun-Times, Chico apparently helped Mrs. Blago obtain her job with the League and also obtained city contracts for the League. A representative of Chico's law firm told the Sun-Times that registration with the state was a mistake by an administrative assistant.
But that is not the end of the story. The League is reported to be in dire financial straits. Tim Novak, ‘We Are Facing Bankruptcy,’ Shelter Warns City, Sun-Times (Jan. 7, 2009). That shouldn’t come as a big surprise. The League occupied what has been reported to be a rundown facility just west of Chicago’s Loop in Greektown. In 2006, the League moved to a new state-of-the art facility. The move appears to have been instigated by the City of Chicago because the Greektown location had become prime real estate.
The new facility is reported to have cost $25 million. Apparently the City of Chicago contributed some $13 million (mostly financed through tax incremental financing--TIF) toward the shelter and the League obtained a $10.8 million loan to pay the remaining costs. All reports suggest that the debt load is crippling the League. Fran Spellman, Daley: ‘No Favoritism’ in Homeless Shelter Move, Sun-Times (Jan. 6, 2009). Despite the new facility, the League recently lost a $1.7 million grant, which would appear to be about 15% of its total revenue (based on the League’s latest tax return available through GuideStar). According to the Sun-Times, “Since it left Greektown, the charity now serves fewer homeless people [and] struggles to pay its bills."
The suggest that there may have been just a little bit of favoritism. It turns out that David Ariola’s firm, Chicago Realty, received $301,700 from the League to oversee construction of the new facility. Tim Novak, City Official Makes $300,000 on Shelter: Daley Appointee Backed Deal to Provide Financing Homeless Project, Chicago Sun-Times (Jan. 26, 2009). Ariola once owned a gym where Mayor Daley worked out. He is now a member of the Community Development Commission, a quasi-governmental entity that reviews and then makes recommendations on all TIF project proposals. So we have one of the members of the Commission that approved the League’s project receiving funds from the League to assist with the project he approved. If that doesn’t smack of a conflict of interest, we don’t know what does. The reports don’t indicate whether there was competitive bidding, but one has to wonder whether there was. Ariola’s wife is friends with the League’s executive director, according to the Sun-Times. More to point, the contract was the first job for Chicago Realty. At the time, the company had only been in existence for two months.
Ah, but it gets even better. The League’s old site was purchased by Michael Marchese, a Daly crony. Marchese then constructed a luxury condo project on the site. According to the Sun-Times, the deal resulting in the razing of the old facility was structured so that that Marchese would not have to set aside units in the condo for affordable housing. Tim Novak, City Razed Homeless Shelter for Marchese, Cellini Luxury Condos (Jan. 7, 2009).
What is particularly puzzling to us is Daley’s response when confronted by the fact that the League is in dire financial straits. According to Daley, “The problem is mismanagement in the last four or five years, unfortunately, of the operation.” That may be the problem, but why then did the City of Chicago fund the project?
At the end of the day, the League is so sort of resources that it is only able to operate the shelter at half capacity. The League’s vice-president, Paul Camenisch, doesn’t blame the Daley administration, according to the Sun-Times. Camenish told the Sun-Times, “They may have led us to do this, but I’m not sure it was their responsibility to prevent it. Tim Novak, Daley’s Clout Deal Puts Homeless Shelter in the Red (Jan. 7, 2009).
This is a case that cries out for a joint investigation by the Internal Revenue Service and the Illinois Attorney General. Both regulators should be asking whether there was inappropriate private benefit and diversion of charitable assets. Amidst all the wheeling and dealing, we have to ask whether anyone really was looking out for the League and its mission. That is a question that needs to be answered.
We have two other questions: Where was the board of directors? What sort of financial analysis and budgeting did it undertake before deciding to vacate the League's old facility for a new one?
Its fun to be a big shot on a board when you live in a nice house.
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